Full Time Equivalent FTE Benefits, Calculation, Example

The FTE calculation  is used to determine if an organization is an Applicable Large Employer (ALE) under the ACA. The Full-Time Equivalent (FTE) is a unit that indicates the workload of an employed person in a way that makes workloads or class loads comparable across various contexts. FTE is often used to measure a worker’s involvement in a project, or to track cost reductions HOA Accounting in an organization. FTE represents the number of full-time equivalent employees, whereas headcount refers to the total number of employees, regardless of how many hours they work.

Future of FTE in a labor market

When a business keeps track of its headcount, it includes all of its workers, whether they work part-time or full-time. Regardless of the amount of hours worked, each individual is considered “one” when using headcount. The amount of hours that are considered full-time is defined by the full-time equivalent (FTE) system. As an illustration, let’s say an organization considers 40 hours a week full time.

Add annual hours worked for full-time employees and part-time employees

Full-time equivalent students8 is one of the key metrics for measuring enrollment in colleges and universities. The measure is often annualized to cover the average annual full-time equivalent students and is designated by the acronym AAFTE. This calculation reveals not just the number of employees but the extent of their contribution in hours worked, thereby providing a clear picture of the actual workforce size. By understanding how the FTE measurements work within the ever-changing business https://www.bookstime.com/ landscape, companies and individuals can smoothly adapt and navigate the shifts in today’s labor market. You can also check the chart below with FTEs for employees working less than the standard 40-hour week.

Basic formula for FTE calculation

• It is sometimes useful to know how the total number of full-time and part-time employees are working in a business.
• A full-time employee can be defined by a 40-hour workweek, 8-hours per day, 5 days per week.
• The total number of hours worked by two full-time workers (40 hours per week) is 4,160.
• To determine your organization’s FTE, you need to establish the standard full-time hours for your employer classification.
• Having an accurate understanding of how much output each full-time worker produces allows managers to make comparisons across individuals, shifts, departments, or even different locations.
• How an employee is defined in a given jurisdiction makes it possible for you as an employer to identify a worker as an FTE employee.
• When she’s not working, you can find her hiking or playing basketball with her friends and family.

For instance, if your organization employs 50 full-time employees working 40 hours a week plus 20 part-time workers at 20 hours each, your FTE count becomes 60 rather than 70 total employees. Full-Time Equivalent (FTE) is a critical metric in workforce management that expresses the total workload of employees in terms of full-time positions. It is used to measure the number of full-time employees that a group of employees or an organization’s workforce represents. FTE is a valuable tool for organizations across various industries as it aids in efficient resource allocation, budgeting, and decision-making.

Who is considered an FTE employee?

The full-time equivalent is an indicator that answers many of the questions Human Resources departments need answers to. This, therefore allows them to make better fte finance meaning decisions regarding personnel management. Yearly, a company generally considers an FTE to be valued at 2,080 hours.

• This metric simplifies workforce planning, allowing you to optimize staffing and streamline budgeting while ensuring compliance with labor laws.
• The measure is often annualized to cover the average annual full-time equivalent students and is designated by the acronym AAFTE.
• In addition to full-time employees, do you also have part-time employees?
• Furthermore, having a clear idea of the FTE provides a basis for calculating the costs and benefits of hiring additional staff, offering overtime, or choosing to hire part-time workers instead.
• For example, if your standard is 40 hours and a worker logs 30 hours weekly, their FTE equals 0.75 (30 ÷ 40).
• One significant shift involves the increasing prevalence of the gig economy, remote work, and part-time employment.

• To ensure accuracy, it’s essential to define the time period for the FTE calculation.
• Lastly, we need to add the full-time FTE to the part-time FTE, which we’ve already established is 1.5.
• For example, if you have a project that is estimated to require 60 hours of work, you would need 60/40 or 1.5 FTEs to do it.
• By understanding FTE requirements, businesses can better match their staffing strategies with current workload demands and operational needs, leading to more effective and strategic hiring practices.
• Let’s walk through a practical scenario to demonstrate how to calculate FTE for your payroll and staffing decisions.
• While we strive to provide up-to-date and accurate information, we do not guarantee the accuracy, completeness and timeliness of the information on our website for any purpose.

FTE is typically used by HR professionals, hiring managers, financial planners, and project managers for workforce planning, resource management, and compliance with labor laws. For example, an employee working 20 hours per week is considered half a full-time employee (if the employer considers a 40-hour workweek full time). As long as the employee’s hours add up to 40 hours per week, it doesn’t matter what hours and days they work. This is critical in today’s workplace, with more people working remotely and with flexible hours. To adjust FTE calculations effectively, first establish your organization’s full-time hour definition. If your company considers 37.5 hours as full-time instead of the standard 40 hours, divide the total hours worked by 37.5 rather than 40.